Ankara - Riyadh, and a New Chapter of the Overlords Alliance
Last Updated: 2023-07-27
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Ankara - Riyadh, and a New Chapter of the Overlords Alliance
The Subject:
Turkish President Recep Tayyip Erdoğan's historic visit to Saudi Arabia seems to remain the most prominent regional event that brings with it the broader regional geopolitics shift, necessarily implying greater economic openness and trade and investment between the two greatest regional powers.
The Predicate:
Certainly, the Turkish economy will recover after the thaw in Ankara - Riyadh relations, because the Saudi market is of great importance to Turkish exporters, and Turkish products are popular in KSA compared to other foreign products.
So, what does the new era of economic relations include? What forms of economic participation will be reactivated? How will Türkiye's economic landscape change in the coming period? Who are the winners and the losers economically from this rapprochement?
A Rapid Tide Follows the Decline in Relations:
Turkish-Saudi relations have grown steadily over the past decades until 2018, when the events associated with the killing of Saudi journalist Jamal Khashoggi and the subsequent repercussions have led to relations between the two countries reach a low point, as the lowest point was in 2021 that affected investment and export traffic.
Indeed, it has recently risen to 200% in March to start a promising new phase of economic relations following the Turkish president's visit to the Kingdom.
These attempts of reconciliation between Ankara and Riyadh will bring about a rapid recovery in all economic sectors between the two regional powers, such as tourism, exports, construction and others, that will revive the Turkish lira, which continues to suffer from low value.
A Doubled Tourist Season:
This long-awaited return must fill all previous gaps, particularly tourism in Türkiye, considering Istanbul's position as a fashion and tourism hub and a destination for the Arabian Gulf tourists, especially Saudis.
For years, Saudi tourists ranked third on the list of tourists coming to Türkiye, falling to 10th place recently. But with the recent warming of relations between Ankara and Riyadh, the next few months are expected to have an active and doubled tourist season for Saudi tourists. Hence, this would also revive the Turkish lira, which is still suffering from a decline in its value.
"Made in Türkiye", Again in KSA's Markets:
In fact, the new détente will return to shorten the way for Turkish exporters' products to Saudi Arabia, as the exports with "Made in Türkiye" term will return to their direct normal course after the Turkish export companies had used third countries before entering the Turkish market, to circumvent the undeclared blockade and the losses it could have caused with customers and producers alike.
We, as Irsaa for International Trade, were one of the ones who experienced this difficult experience and we hope that today we are going beyond this stage. However, what we would like to say is that by the virtue of our experience in the Saudi market, this market is always attractive and welcoming to Turkish products. In Irsaa, our list of exports included the industrial production lines and food products, industrial products, chemical products, furniture, timber, stone, alabaster, building materials, accessories, decoration, cladding, broadcasting and communication technologies, all of which were manufactured in Türkiye.
Like other Turkish exporters and thousands of Saudi customers, we expect the talks between Riyadh and Ankara to lead to a recovery in bilateral trade and a reduction in restrictions on Turkish exports to the kingdom. Where Turkish exports, which are back with the term of "Made in Türkiye", reached nearly $70 million in the first three months of this year, up from $55 million over the same period last year, up 25%, which is very promising.
These indicators peaked in March, leaping from $18.5 million to $58 million, an increase of 215 per cent year-on-year, and it is understood that this stark rise in bilateral trade will not stop.
This openness follows a silent boycott imposed by Saudi Arabia on Turkish goods since 2018, as a result, Turkish exports to Saudi Arabia dropped sharply by nearly 92% throughout 2021, falling from $3.1 billion to $2.3 billion, and from this to $189 million with the embargo.
Simultaneously with the loss of the Turkish lira 44 percent of its value against the U.S. dollar in 2021.
More Saudi Real Estate in the Hands of Turks:
The new page will be primarily promising for Turkish contractors in Saudi Arabia, after contracts and businesses have faltered there to the extent that Turkish contractors have faced in recent months real problems in collecting the entitlements of their work previously contracted in KSA, and what is currently under construction. Hence, this push forward in bilateral relations moves the wheel of the contracting undoubtedly, and ends the stalemate for Turkish construction companies in Saudi Arabia.
According to figures from the Turkish Contractors Association, Turkish companies carried out a total of $3.43 billion in projects in the Kingdom in 2018, suddenly falling to $559 million in 2019, reaching $21 million in 2020.
The Ministry of Foreign Affairs also confirms that there are more than 200 Turkish companies operating in Saudi Arabia, where Saudi Arabia is the second Gulf state after Qatar, and the seventh country in the world in terms of the volume of work accomplished by Turkish contractors there. To date, Turkish contracting companies have carried out more than 100 projects in Saudi Arabia. Indeed, Saudi investment in Türkiye is estimated at $2 billion.
In 2017, Saudi citizens owned 3,545 properties in Türkiye, as we experienced in our company Mersat Real Estate closely the desire of thousands of Saudis to really own a property in Türkiye. Definitely, Saudi nationality has always remained the second most owning property in Türkiye over the past five years, and we are honored by many Saudi customers who have had the experience of purchasing a unique property through our company, and we look forward to repeat this experience with them again, since the indicators say that everyone is seeking to throw everything behind him and start a new chapter.
The Conclusion:
Ultimately, wealthy Gulf states have significant investment potential that can help solve many of Ankara's economic problems. In addition to previously strong trade in the specialized sectors of both countries, Turks will benefit from efforts to resume trade with Saudi Arabia after a nearly four-year break.
by: Mr. Abdulkader Tahhan
The Director General of Mersat Investment Group.
A Member of Turkish Exporters' Assembly (TIM)
The Director General of Mersat Investment Group.
A Member of Turkish Exporters' Assembly (TIM)
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